Dominion Virginia Power top bidder at $1.6 million for offshore wind development lease

Virginia Dominion Power submitted a successful $1.6 million bid Wednesday to lease nearly 113,000 offshore acres for the development of wind turbines that could power 700,000 homes.

Virginia's largest utility beat out one other bidder, Apex Virginia Offshore Wind LLC of Charlottesville, in the nation's second lease sale of ocean bottom dedicated to the development of huge wind turbines. Eight energy companies were qualified to bid on the Virginia lease.

The U.S. Justice Department will conduct an antitrust review before the lease is officially in place. That is expected to take 30 days. The company will then have six months to submit a site assessment plan for the 112,800-acre area, which has the potential to generate 2,000 megawatts of electricity.

"This is a major milestone getting leases in the hands of operators we believe are in a position to do something with the leases and stand up wind generation facilities, but a lot of work needs to be done on an entire range of issues," said Tommy P. Beaudreau, director of the Bureau of Ocean Energy Management, which conducted the auction.

Dominion said it expects it will be a decade before the first turbine is installed in the area, about 23.5 miles off Virginia Beach on the outer continental shelf. The utility is involved with offshore wind research projects intended to lower the energy source's cost, which is significantly higher than fossil fuels.

"Offshore wind has the potential to provide the largest, scalable renewable resource for Virginia if it can be achieved at a reasonable cost to customers," said Mary C. Doswell, Dominion's senior vice president for alternative energy solutions.

The company has five years within signing the lease to submit a construction and operations plan.

While advocates of clean energy cheered the lease sale, many remain skeptical of Dominion's plans and have suggested the utility will sit on the lease area without developing wind turbines. Dominion has dismissed that suggestion, saying it will have to meet federal milestones to develop wind power in the area.

Without commenting directly on Dominion's projected 10-year estimate to get the first turbine installed, Beaudreau said, "We'll be quite focused on overseeing diligent development in this area."

Glen Besa, director of the Sierra Club in Virginia, said the Dominion bid signals a "move in the right direction" by the utility away from power generation that produces carbon pollution linked to climate change. "It is critical that Dominion look to wind, solar and energy efficiency as the primary sources to meet our future energy needs," he said.

The development area was carved out of the Atlantic after extended negotiations involving the Navy, Coast Guard, commercial fishing interests, port officials, and NASA, which operates a launch center on the Eastern Shore. This section of the coast is one of the busiest on the Eastern seaboard. It includes the world's largest naval base in Norfolk.

Clean energy advocates said the Virginia lease auction is a key step in the development of an offshore wind industry. The U.S. does not have an offshore wind farm, although several are in development.

Studies have estimated that the development of an offshore wind industry in Virginia would create in the range of 10,000 jobs.

Advocates of offshore wind power have said Virginia's deep-water port facilities and underused shipbuilding industry are key assets to develop an offshore manufacturing industry and a supply chain for the wind industry.

"This will result in millions of dollars in industrial activity and the creation of many new high-skilled jobs in our state," Gov. Bob McDonnell said in a statement.

First, however, the U.S. must attract the manufacturers that are now primarily based in Europe, which has a huge head start over the U.S. in developing offshore wind energy.

Oceana, an ocean conservation group, said the biggest barrier to developing offshore wind energy is investment dollars. It called on Congress to provide a long-term extension of an investment tax credit for offshore wind.

"To get offshore wind turbines built, we must stimulate investment," said Jacqueline Savitz, Oceana's vice president for U.S. oceans.

Besides the one-time lease fee of $1.6 million, Dominion would also pay a rental fee of $3 an acre once the lease wins final approval and an operating fee during power generation.

In July, Deepwater Wind was the provisional winner with a bid of $3.8 million for a leasing area more than 10 miles off Rhode Island and Massachusetts. It was the nation's first lease sale.

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Steve Szkotak can be reached on Twitter at http://twitter.com/sszkotakap.